Why Does Neoliberalism Persist Even After the Global Crisis?

The 2007-9 crisis in global capitalism brought a new energy and focus to the heterodox economists, and more broadly to the critics of neoliberalism from different arenas of society. It seemed clear at that time that neoliberalism had run its course when it met its structural contradiction – with the burst of the US housing bubble and the concomitant financial crises across the world, it looked like the avenues through which demand was being generated were closed and the system was poised for structural change. Three years later, Southern Europe is witnessing an intense so-called sovereign debt crisis with the working people bearing the brunt of it, and real economies in the developed world are continuing to witness slow growth. The US seems to be under the threat of the so-called fiscal cliff (which seems more like a political event rather than an economic one). The economies that grew quickly during the neo-liberal period, like China and India, have slowed down considerably. Across the globe, we seem to be going through a period of uncertainty without a clear path ahead. Yet, neoliberalism persists. Why?

There are multiple explanations for this. Bailout packages of various governments were directed at rescuing financial capital, and this has pitted the interests of financial capital against the interests of the majority. The global left has not been strong enough to take advantage of the crisis to better represent the interests of the majority. Governments across the world, after a brief gap, have returned to their neoliberal posture of supporting financial capital and so forth. There is truth in all these explanations.

However, we need to broaden the array of explanations both to take into account the spatial diversity of neoliberalism, as well as to deepen our analytical understanding of this persistence. I offer one such explanation from field explorations in India to add to the existing explanations. This addition is not simply academic, but it shows the need for deeper political engagement to bring about systemic change, given that our explanations of the structural contradictions of neoliberalism are on the mark.

In two recent field visits that we (a group of local researchers) undertook to understand the persistence of neoliberalism at the concrete level, we found some interesting phenomena. Both these visits were in the state of Andhra Pradesh in South India. The first visit was in the region of Telangana, which is highly politicized right now, as the people of the region are fighting for a separate state within the Indian nation-state. The second visit was to a tribal habitat in the northeastern region of the same state, where communist struggles have been active for a while. In both these areas, there are continued appropriations of common lands, common resources and minerals, such as Granite and Bauxite by local and foreign capitalist elites aided by the State. In the process, these elites are destroying the local livelihoods without creating credible alternative. Both these are classic cases of primitive accumulation or accumulation by dispossession, a process that has centrally defined neoliberalism over the last thirty-five years across the globe.

Accumulation by dispossession operates in our times through the following modes of appropriation. First, it operates through the acquisition of lands from small producers such as peasants, tribal people, artisans and the urban poor in the name of Special Economic Zones and the like. Some of the lands acquired thus, have became open to speculative enterprises of real estate dealers. Second, there has been a large-scale privatization drive in most countries that has made public sector enterprises alienate their properties at throwaway prices to private players. Third, and these are the cases that we have focused on – commons have been appropriated with ease either because the laws governing them are weak or because common properties are often meddled with by the State. What we found in these two regions is that the particular modes of appropriation that have come into being with great force during the neoliberal period have persisted even after the crisis.

Why is this the case? One explanation that ties in with the explanations above is that resistance has not been strong enough or effective from the people and their social movements or from the larger left movements. The other explanation that we offered is that neoliberalism has been able to create structures of populism that are deeply entrenched. The local elites have pursued a three-fold strategy for the continued appropriation of the commons. First, they (with the support of the State) have put in place various populist policy imperatives that have temporarily addressed the consumption needs of the majority without altering the deeper neoliberal structural forces that have inhibited employment growth and wage growth over the last thirty years.

For example, there are schemes such as housing or subsidized food for the poor even as their productive resources such as land are acquired by the elites/states. These have tended to perpetuate themselves after the global crisis, even with the loud demands for austerity. Second, the elites have continued to appropriate common and public resources to keep their own accumulation levels above an acceptable minimum in a time of slowdown of accumulation opportunities through regular economic growth. Resistance is sought to be controlled through populism of the kind discussed above. Even in regions that are highly politicized, such as Telangana, the leadership of the movement has been hand-in-glove with the local elites who gain consistently through the perpetuation of these appropriation practices.Third, professionals and middle classes have been the beneficiaries of a system that has thrived on the creation of enclave economies where there is a sharing of rents among the elites and these professional groups. These professional classes have taken up key positions in the government, media, corporate executive roles, and as intermediaries between the elites and the working people who use the commons. The broad support of these classes for the local elites has played a key role in the perpetuation of neoliberalism. As long as these processes persist, neoliberalism will be strong on the ground, with the elites and non-elites bound together in the larger neoliberal system through the different, yet entangled processes of appropriation, rent sharing and populism.

Of course, this cannot go on, since the logic of austerity is bound to create contradictions in the path of populism. However, this contradiction may unfold very differently across space and time, as not all governments are going to react identically to the demands of austerity. The 1% in the US (that the Occupy movement has targeted) or the top decile of the population (in countries like China and India) continue to benefit from the perpetuation of the neoliberal configuration while they are pitted against their large majorities. As long as the political groups on the ground do not make their voices heard loudly enough against the top 1% or the top 10%, and as long as there are continued benefits for the elites from the perpetuation of neoliberalism, the system will persist.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Vamsi Vakulabharanam is a faculty member with the School of Economics at the University of Hyderabad, India. He works on issues pertaining to political economy of inequality and development economics. He can be reached at vamsi.vakul@gmail.com.

Why Does Neoliberalism Persist Even After the Global Crisis?

The 2007-9 crisis in global capitalism brought a new energy and focus to the heterodox economists, and more broadly to the critics of neoliberalism from different arenas of society. It seemed clear at that time that neoliberalism had run its course when it met its structural contradiction – with the burst of the US housing bubble and the concomitant financial crises across the world, it looked like the avenues through which demand was being generated were closed and the system was poised for structural change. Three years later, Southern Europe is witnessing an intense so-called sovereign debt crisis with the working people bearing the brunt of it, and real economies in the developed world are continuing to witness slow growth. The US seems to be under the threat of the so-called fiscal cliff (which seems more like a political event rather than an economic one). The economies that grew quickly during the neo-liberal period, like China and India, have slowed down considerably. Across the globe, we seem to be going through a period of uncertainty without a clear path ahead. Yet, neoliberalism persists. Why?

There are multiple explanations for this. Bailout packages of various governments were directed at rescuing financial capital, and this has pitted the interests of financial capital against the interests of the majority. The global left has not been strong enough to take advantage of the crisis to better represent the interests of the majority. Governments across the world, after a brief gap, have returned to their neoliberal posture of supporting financial capital and so forth. There is truth in all these explanations.

However, we need to broaden the array of explanations both to take into account the spatial diversity of neoliberalism, as well as to deepen our analytical understanding of this persistence. I offer one such explanation from field explorations in India to add to the existing explanations. This addition is not simply academic, but it shows the need for deeper political engagement to bring about systemic change, given that our explanations of the structural contradictions of neoliberalism are on the mark.

In two recent field visits that we (a group of local researchers) undertook to understand the persistence of neoliberalism at the concrete level, we found some interesting phenomena. Both these visits were in the state of Andhra Pradesh in South India. The first visit was in the region of Telangana, which is highly politicized right now, as the people of the region are fighting for a separate state within the Indian nation-state. The second visit was to a tribal habitat in the northeastern region of the same state, where communist struggles have been active for a while. In both these areas, there are continued appropriations of common lands, common resources and minerals, such as Granite and Bauxite by local and foreign capitalist elites aided by the State. In the process, these elites are destroying the local livelihoods without creating credible alternative. Both these are classic cases of primitive accumulation or accumulation by dispossession, a process that has centrally defined neoliberalism over the last thirty-five years across the globe.

Accumulation by dispossession operates in our times through the following modes of appropriation. First, it operates through the acquisition of lands from small producers such as peasants, tribal people, artisans and the urban poor in the name of Special Economic Zones and the like. Some of the lands acquired thus, have became open to speculative enterprises of real estate dealers. Second, there has been a large-scale privatization drive in most countries that has made public sector enterprises alienate their properties at throwaway prices to private players. Third, and these are the cases that we have focused on – commons have been appropriated with ease either because the laws governing them are weak or because common properties are often meddled with by the State. What we found in these two regions is that the particular modes of appropriation that have come into being with great force during the neoliberal period have persisted even after the crisis.

Why is this the case? One explanation that ties in with the explanations above is that resistance has not been strong enough or effective from the people and their social movements or from the larger left movements. The other explanation that we offered is that neoliberalism has been able to create structures of populism that are deeply entrenched. The local elites have pursued a three-fold strategy for the continued appropriation of the commons. First, they (with the support of the State) have put in place various populist policy imperatives that have temporarily addressed the consumption needs of the majority without altering the deeper neoliberal structural forces that have inhibited employment growth and wage growth over the last thirty years.

For example, there are schemes such as housing or subsidized food for the poor even as their productive resources such as land are acquired by the elites/states. These have tended to perpetuate themselves after the global crisis, even with the loud demands for austerity. Second, the elites have continued to appropriate common and public resources to keep their own accumulation levels above an acceptable minimum in a time of slowdown of accumulation opportunities through regular economic growth. Resistance is sought to be controlled through populism of the kind discussed above. Even in regions that are highly politicized, such as Telangana, the leadership of the movement has been hand-in-glove with the local elites who gain consistently through the perpetuation of these appropriation practices.Third, professionals and middle classes have been the beneficiaries of a system that has thrived on the creation of enclave economies where there is a sharing of rents among the elites and these professional groups. These professional classes have taken up key positions in the government, media, corporate executive roles, and as intermediaries between the elites and the working people who use the commons. The broad support of these classes for the local elites has played a key role in the perpetuation of neoliberalism. As long as these processes persist, neoliberalism will be strong on the ground, with the elites and non-elites bound together in the larger neoliberal system through the different, yet entangled processes of appropriation, rent sharing and populism.

Of course, this cannot go on, since the logic of austerity is bound to create contradictions in the path of populism. However, this contradiction may unfold very differently across space and time, as not all governments are going to react identically to the demands of austerity. The 1% in the US (that the Occupy movement has targeted) or the top decile of the population (in countries like China and India) continue to benefit from the perpetuation of the neoliberal configuration while they are pitted against their large majorities. As long as the political groups on the ground do not make their voices heard loudly enough against the top 1% or the top 10%, and as long as there are continued benefits for the elites from the perpetuation of neoliberalism, the system will persist.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Vamsi Vakulabharanam is a faculty member with the School of Economics at the University of Hyderabad, India. He works on issues pertaining to political economy of inequality and development economics. He can be reached at vamsi.vakul@gmail.com.